Brent gaps down as US-Iran pause attacks over the weekend

This drop in futures prices comes as US President Donald Trump has paused attacks on Iran for a second night in a row to give diplomatic talks "a little bit of room", according to US ambassador to the UN Mike Waltz. An Iranian army spokesperson said on Sunday that Tehran has halted its "retaliatory" attacks in response. The White House is set to meet Israeli Prime Minister Benjamin Netanyahu on Tuesday, which might further help set the tone for oil prices this week. Meanwhile, Iran's Foreign Minister Abbas Araghchi has called the Ukrainian bombing of a commercial vessel in the Caspian Sea a violation of the United Nations Charter and has said it "cannot go unanswered." Araghchi has accused Israel of provoking the attack in an attempt to "drag Europe into its war." Meanwhile, Iran has also said that six ships attempted to pass through an unauthorised route in the Strait of Hormuz after switching off their navigation and positioning systems, as per state broadcaster IRIB. Elsewhere, the Houthis fired on Saudi oil installations at sites in Jizan and Yanbu on Saturday, while Saudi-backed forces bombed the Houthis. In Yanbu, two ballistic missiles aimed at oil installations were intercepted by a US-made Patriot battery operated by the Greek military in Saudi Arabia, according to Reuters. Finally, at the time of writing, the Sep/Oct'26 and Sep/Mar'27 Brent futures contracts stand at $3.25/bbl and $10.30/bbl, respectively.

This morning in Brent/Dubai, we traded up into the end of the window, with the Aug Brent/Dubai initially trading down from $7/bbl to $6.74/bbl, before rallying to $7.70/bbl. There were enormous amounts of Dated/Dubai selling, Aug and Sep, as well as Aug Dated vs Sep Dubai selling. This kept the pressure on Brent/Dubai after the window, but there was continued buying of Sep Brent/Dubai EFS by a producer, selling of the Aug/Sep Dubai spread by a trade house, and buying of the Sep/Nov Brent/Dubai box by a trade house. This meant we traded range-bound in the Brent/Dubai. The Dubai spreads traded lower this morning, the Aug/Sep spread down from $1.70/bbl to $1/bbl. There was smalls Oct/Jan Dubai spread buying. The quarterlies were very quiet, with a fund offering Q1 Brent/Dubai around $2.70/bbl.

A strong start to the week on VLSFO. Even with crude down a fair bit over the weekend, spreads came into the week bid. Aug/Sep Sing traded up to $43.00/mt from Friday's close of $40.25/mt. The Sing crack was stronger off the back of spread strength, trading as high as $21.50/bbl. The complex did relax into the window and post-window; Aug/Sep Sing traded down to $41.00/mt while the crack closed the morning around $21.00/bbl. Liquidity on Euro 0.5 was very low this morning. Euro cracks were trading around $8.00/bbl in August while Aug/Sep Euro traded at $30.50/mt.

On the contrary, HSFO came under pressure to start the week. Particularly in 380, spreads were down off the bat with Aug/Sep trading down to $18.50/mt while the 380 crack weakened down to -$2.75/bbl. There was also 380 E/W selling in Aug and Sep this morning; Aug 380 E/W trended down to $36.50/mt in a pretty linear fashion. The 3.5% barge crack traded a touch higher up to -$8.50/bbl due to E/W weakness, while Aug/Sep barges traded down to $9.00/mt from $9.50/mt on weaker crude.

This morning in distillates, Sing gasoil spreads were scale back bid into Q4, with Sep/Oct trading from $9.05/bbl down to $8.85/bbl, while the front naphtha E/W saw strong selling, with Aug trading from highs of -$25/mt down to -$42/mt post window. Regrade sold off in the front, Aug trading from -$2.25/bbl down to -$2.80/bbl.

Prompt ICE gasoil spreads opened lower before rallying, with Aug/Sep trading down to $50.00/mt before firming to $55.25/mt last, while the Sep crack rallied to $65.90/bbl. Both heating oil spreads and HOGOs rallied, the Aug HOGO swap trading up to 27.50c/gal.

This morning in gasoline, the East opened a lot weaker, with refiners chasing down flat price, pushing down Aug'26 92 cracks to $25.50/bbl. Spreads were offer-side as well, with Aug/Sep getting sold down from $7.12/bbl to $6.90/bbl, and the front gasoline E/W weakened from -$8.80/bbl to -$9.35/bbl as EBOB remained strong. EBOB cracks opened lower at $34/bbl but rallied to $35/bbl, and Aug/Sep firmed from $64.50/mt to $67/mt.

This morning in Naphtha, MOC was better offered in Aug with trade selling -5c on Aug MOPJ MOC. Aug naphtha E/W was weaker, with market makers hitting $57/mt in Aug E/W, which got hit down to $47.50/mt at the end of the window, with the Aug/Sep EW box getting hit at $6/mt. There was sell-side interest in the Q4 E/W from a trade at $35.25/mt, with the Cal E/W finding a bid at the end of the window, which got hit at $23.25/mt, bid on. Sep/Oct/Nov MOPJ fly was better offered, with a seller stepping down to $12/mt. Prompt cracks open lower than Friday's close, getting hit pre- window at -1.9/bbl in Aug, but finds a floor and recovers slightly, trading -$1.65/bbl at the end of the window.

This morning in NGLs, there was some early Chinese flat price buying out of Oct at $650/mt. Aug LST/FEI opened trading at -$325/mt, before weakening to trade at -$334/mt, before strengthening back into the window to print -$326/mt by the close. Sep LST/FEI was sold at -$289/mt, up from -$313/mt at last week’s close. Aug/Sep FEI was trading up on the day, at $38/mt end window, having opened at $33/mt. Sep/Oct FEI saw less of a move, strengthening to $21/mt from $19/mt, before closing $1 weaker. In CP, Aug/Sep initially sold off down to $27/mt, before strengthening back to $30/mt, where it opened the morning. Sep FEI/CP sold at $95/mt, down from last Friday’s closing level of $108/t. At the end of the window, there was no FEI flat price action on screen.

Perfect timing to stop airstrikes and negotiate, with 30-year yields breaking new highs and the Nasdaq closing on critical support (futures, of course, bounced this morning). On a wider viewpoint, global bond yields hit the highest level since 2008.

US 30-year bond yield, testing 5.20. Tsy Sec Scott Bessent does not want to see this break higher. (Chart 1: Bloomberg). OIS prices a 30% chance the Fed hikes on Wednesday; I simply cannot see Fed Governor Warsh (selected by Trump) hiking when the market hasn’t priced it. Sell July meeting, buy Sep 16th meeting.

There is now a 55% chance that the United States and Iran will sign a ceasefire this month, according to Polymarket traders.

Big earnings this week from: Microsoft, Meta Platforms, Robinhood Markets, Apple, Amazon, SoFi Technologies, Reddit, Visa, United Parcel Service (UPS), Mastercard.

Wheat futures hit a 3-year high.

Billionaire Paul Tudor Jones on buying the S&P 500 right now: “If you buy the S&P at this current valuation, the 10-year forward returns are negative when you buy with the S&P P/E of 22. That's what history shows.” He's not predicting a crash. He says the current setup is more leveraged than anything he's seen, including 2008. “The stock market's really high, and it's going to be really hard to make money from here.”…...... the other side of the story - Nasdaq 100 P/E was 86x in May 2001... its 24x today....

Short or short squeeze? Short interest in the S&P 500 has climbed to around 3.7% of free float, one of the highest levels since 2010. This indicates that hedge funds and other investors are increasingly betting on a decline in U.S. equities despite the market trading near record highs.
VIX heading into more volatile seasonality.